We Are Nearing the End Game For Central Bank Intervention

The media and 99% of analysts believe the Fed is and can continue to act aggressively to prop up the markets, the fact is that the Fed has been reining in its monetary stimulus over the last nine months, largely relying on verbal intervention from Fed Presidents to push stocks higher.

We at Phoenix Capital Research have known this for some time. But the general public and financial media are only just starting to realize that the Fed, in some ways, is at the end of its rope in terms of monetary intervention. This has become increasingly clear in the Fed FOMC statements.

Consider the latest FOMC statement released earlier this week…

Fed Signals No Need for More Easing Unless Growth Falters

The Federal Reserve is holding off on increasing monetary accommodation unless the U.S. economic expansion falters or prices rise at a rate slower than its 2 percent target.

“A couple of members indicated that the initiation of additional stimulus could become necessary if the economy lost momentum or if inflation seemed likely to remain below” 2 percent, according to minutes of their March 13 meeting released today in Washington. That contrasts with the assessment at the FOMC’s January meeting in which some Fed officials saw current conditions warranting additional action “before long.”

Ignore the verbal obfuscation here. The Fed knows that inflation is higher than 2%. It also knows that US growth is faltering. The above announcement is the Fed essentially admitting its hands are tied regarding more easing due to:

Gas being at $4 and food prices not far from record highs.

This being an election year and the Fed now politically toxic.

Growing public outrage over the Fed’s actions (secret loans, etc.) in the past.

Again, we are in a process of slow awakening to the fact that the Fed has not solved the problems that caused 2008. Instead, the Fed has exacerbated these problems (excess leverage) and created new problems in the process (inflation).

Fortunately for the Fed, the European Central Bank has picked up the intervention slack since the Fed began pulling back in mid-2011. Indeed, between July 2011 and today, the ECB has expanded its balance sheet by an incredible $1+ trillion: more than the Fed’s QE 2 and QE lite combined (and in just a nine month period).

The two largest interventions were the ECB’s LTRO 1 and LTRO 2, which saw the ECB handing out $645 billion and $712 billion to 523 and 800 banks respectively.

As a result of this, the ECB’s balance sheet exploded to nearly $4 trillion in size, larger than the GDPs of Germany, France, or the UK.

This rapid and extreme expansion of the ECB’s balance sheet (again it was greater than QE lite and QE2 combined… in nine months) indicates the severity of the banking crisis in Europe. You don’t rush this much money out the door this fast unless you’re facing something very, very bad.

This rapid expansion has also resulted in the ECB obtaining a similar political toxicity to that of the US Federal Reserve. Indeed, those European banks that participated in the LTRO schemes have found their Credit Default Swaps exploding relative to their non-LTRO participating counterparts.

The reason for this is obvious: any bank that participated in either LTRO implicitly announced that it was in dire need of capital. As a result of this the markets have stigmatized those banks that participated in the schemes, thereby:

Diminishing the impact of the ECB’s moves.

Indicating that the ECB is now politically toxic in that those EU financial institutions that rely on it for help are punished by the markets.

In simple terms, the Fed’s hands are tied and the ECB is out of ammo. The End Game for Central Bank intervention is approaching. And it won’t be pretty… First Europe. Then Japan. Then the US.

So if you’re not already taking steps to prepare for the coming collapse, you need to do so now. I recently published a report showing investors how to prepare for this. It’s called How to Play the Collapse of the European Banking System and it explains exactly how the coming Crisis will unfold as well as which investment (both direct and backdoor) you can make to profit from it.

PS. We also feature numerous other reports ALL devoted to helping you protect yourself, your portfolio, and your loved ones from the Second Round of the Great Crisis. Whether it’s a US Debt Default, runaway inflation, or even food shortages and bank holidays, our reports cover how to get through these situations safely and profitably.

Whatever his provenance, the man is right, if doubling down: the markets are reacting to the printing and devalue those banks that get the juice, while taking a run up with equities as the bonds go south. Ho, hum. Who doesn't see that? The further point he makes is also sound: that because the markets, and indeed even Ma and Pa, see the central banking charade, the printing is at an end point. It will not staunch interest rates because inflation is everywhere to be seen. Anyone not see that? Graham simply clarifies here to the logical extension: the Fed, the ECB, etc are in game-over mode. They know it, we all know it. The time factor is no longer a factor - it has begun and like a large giant falling down it has the dynamic of slow motion to it.

So any economic recovery now underway will be held in check by inflation and unlike the past, this time, the central bank debt bomb goes off and takes the money off the table. The first to feel it will be local governments in bankruptcy court and massive layoffs in that sector while public unions agitate more and more to keep what they have stolen - so, lots of ugly strikes. The economy is not growing now and will contract further, certainly by the summer as the chimera of job growth, erratic retail sales and a worldwide collapse of durable goods combines into a perfect spiral downward. The well managed companies will maintain for awhile and there may be even some period of false optimism when Romney gets elected, but it won't be enough and the political class will make the current poison feel almost benign - the civil unrest that begins with the media agitating a race war, public sector unions not getting their bailouts from the Feds, new taxes at the state and local level creating more dislocation and inflation steady on, then well, by this time next year the hope that the American consumer will pull a rabbit out of the hat to save the world will be gone - the consumer will hunker down to wait out the political and social upheaval as government services and security collapse around the remora classes in hyper blue model fail mode because the cash will go to pay interest - and that will continue - for years. The only way out may be a jubilee moment to pay down all consumer debt and let the banks rot to hell - short of that, there will be blood.

A Banksters worst nightmare, Being forced to Return to Real Money=United States Note=Lawful Money. The real reason you pay an income tax, is for the privilege of using a private currency. Also known As A:Federal Reserve Note, Demand from your bank or brokerage, lawful money and the tax goes away, with a tax exemption on lawful money, all of your money is yours.

Web search these four different phrases: Redeemed in Lawful MoneyorUnited States Noteor Redeemed in Lawful Money Pursuant to Title 12 USC §411or deposited for credit on account or exchanged for non-negotiable federal reserve notes of face value

The Fed's hands are not "tied". If *you* tied your *own* hands, then you can easily untie them at your earliest convenience - especially if you merely used "words" to tie your own hands.

The ECB/EU is not out of ammo. They have only just *begun* to print.

If you had a printing machine, then you are an alchemist. It is absurd to think of an alchemist as being bound by accounting *rules*. So, OF COURSE these governments are not bound by accounting. duh. Secondly, if you make the rules, the OF COURSE these governments are not bound by rules. duh.

I agree that both the ECB/EU end-game looks like a bad break-up. But, that end-game could be years away. If you believe it is close at hand, then you should be all-in shorting the Euro. Are you? A lot of folks lost a ton of money shorting the Euro based on the obvious truth that it is an inherently flawed currency system and, therefore, *should* blow up. These EU bastards are the quintisential can-kick social engineering squid-trained crony-socialism/crony-capitalism experts. Why is that important? Because the USA will learn from them - learn in a way that allows USA to extend the present fiat system further than the EU will be able to do.

the problem isn't "money printing." it's "print and bail, print and bail." and THAT's what's coming to an end. There is nothing new in this by the way. "The good ol' USA has done it for centuries." What IS different is the staggering size of the bankruptcies that will result from the withdrawal of liquidity. (which is a result of the BAILOUTS coming to an end...not the money printing which has as its sole purpose "keeping interest rates low to zero.")

Let's be really honest here, most people deserve to suffer a currency crisis. They have voted in Politicians who have printed money for 50 years to pay for all the crap that they think they are "entitled" too. Now we are getting to the point where we just can't print fast enough to afford the ever increasing prices and that is all that is happening.

Good on people who can see this for what it is, and buy gold and silver. Shame on those who think the fantasy can just go on forever.

The FED will print. The only reason they would temporarily pause or slow down is to put the fear of God (GS, lol) into US politicians, then they will get carte blanche permission to print to infinity. So Graham might tout his "correct" forecast in a couple of months, but it will only be for a brief moment.

a reader on Jim Sinclairs website today reported he was paying $60,000 a year to put his daughter through Uni for accountancy ...i couldn't believe it!

i'd buy her 12 books a year (cost approx. $80.00) and make sure some were sharp cookie/practical books rather than the garbage 'education' teaches the kids ..by the end of 3-4 years she'd be light-years ahead of 'qualified' students

Ammo is the key word. A global superpower is not going destroy its own currency to the point where the military's fuel budget becomes unaffordable. The armed forces have to buy fuel in dollars just like the rest of us. Use your head.

"A global superpower" will do exactly what its banks want it to do. The banks will not (cannot) tolerate deflation or wide-spread default. They will always kill the currency and/or host government to save their system and only have to do it nominally. Remember what happened to another global superpower when they collapsed. Their military was left where they were deployed, with no money to get home, and were eventually absorbed by newly broken-off governments; the banks, however, continued on.

"If the American people ever allow PRIVATE BANKS to control the issue of their currency, FIRST BY INFLATION, THEN BY DEFLATION, the banks and corporations that will grow up around them will deprive the people of all property until their children wake up homeless on the continent their Fathers conquered."

Well ... at least you didn't attribute it to Jefferson; I'll give you that much. The oft-quoted statement is not only inherently unclear, it is not scoped correctly for the current situation. The continent referenced is no longer isolated economically and the currency is now the reserve currency of the world backed only by a pile of debt our founding fathers could never have conceived. There is no way to de-lever the dollar politically, commercially or even peacefully without destroying it.

The timing for this is impossible for anyone to predict, so GS can be excused for persistent calls.

Europe is the bigger disaster, and nobody knows how that's going to turn out. As long as the US isn't terrible, the Fed just waits until the Euro picture is clearer.

What is teh "end game"? The end game begins when the US economy starts going down nominally in spite of their induced inflation. Then they'll have to up the ante: inflation must always cover deflation. This is the essence of the hyperintflationary sprial: its caused by governments and central banks that try to stop a healthy deleveraging and its natural consequence, deflation.

If you sprint too early in the race you crap out before the finish line and your opponents breeze on by you. The fed has to save the big QE3 till close enough to the election that the ensueing QE3 party will be raging at its height and before the actual consumer gas and food price hikes that will follow take place. I'd say QE3 party on at mid-September. That is why, IMHO, that the fed is holding the line on new announced massive QE. In the meantime they must keep their heads down below the trench top and snipe a few rounds at targets of opportunity, which unfortunately includes gold/silver bugs such as myself.

The extra crappy crappiness of Europe and the US is allowing the US to hang itself higher, and get hung last, with the sickening sounds being a bit more dramatic but no more lethal for it. The U.S. gets most of the oil it uses from its own hemisphere, which it will continue to control/stabilize whatever happens financially. Europe and Japan, not so much.

The sky IS falling. It just hasn't hit the ground yet and this is what is making people too complacent for their own good. The distance varies on your judgment but also your position. If you have lost your job, home and hope then it already has hit. If you are up in the clouds with massive bonuses, big bank balances and expensive art work in your bathroom, then things are looking mighty fine from Olympus.

China has a problem, in the same sense of "When you owe the bank a million dollars and you can't pay, the bank has a problem."

Germany has the same problem vis a vis the rest of Europe.

Neither country will be able to "take" what it is owed. Mercantilism, the ideology of exporting, has its limits, and those limits will be reached. What cannot go on forever will stop, and often enough, reverse.

"It’s called How to Play the Collapse of the European Banking System and it explains..."

How to PLAY the collapse? History has shown that those that play with things like food and fuel during a collapse pay the highest price. People do not take kindly to their futures being used as speculation when they are concerned about finding their next meal. Right now there are too few that are awake. The normalcy bias keep us from freeing ourselves from the chains of bondage we were born into. Go ahead and PLAY with the future of hundreds of millions of people's lives. They will be sure to hold you accountable.

NTM accountability is Sooooo 20th century. If there were going to be anybody held to account over anything financial we already have thousands of speculators and profiteers that could be sent to prison. Nobody will be held accountable in the collapse and for that matter they will never even admit there is a collapse. Just as TPTB say we are in a recovery rather than the second stage of the the Second Great Depression.